Trang 1 DECLARATIONI would like to assure you that the research topic “Solutions to enhancing the efficiencyof capital mobilization at Sai Gon Thuong Tin Commercial Joint Stock BankSacom
Rationale of the study
To achieve development goals, an indispensable condition for any country is the investment capital for the economy However, in the process of operation, the economy must constantly deal with a variety of scenarios where there is an excess of capital as well as a shortage of capital in order to function Specifically, capital is one of the most significant input components for any enterprise, not just banks, special financial intermediation in the economy A commercial bank’s primary activity is raising capital. Therefore, commercial banks generally need to open up capital for capital mobilization efforts Nowadays, banks require its high efficiency, the question of capital mobilization is not only where it come from but what needs to be done to achieve the highest effifiency and meet the needs of banks It is become harder and harder for banks to expand because of all the hardships they face, including inflation threats brought on by a variety of objective and arbitrary causes, the effects of trade policies, the effects of monetary tightening measures, etc Beside, banks use capital mobilization to do many activities such as providing credit or providing services So that, a commercial banks need to take action in measure the credibility and trust of the customers towards the bank, thereby promoting the increase in market share, operational scales as well as the status of the bank on the market.
Through its operations, the Vietnamese commercial banking system in general and theVietnam International Commercial Joint Stock Bank in particular have steadily increased their ties to all economic sectors As a tool to advance the social economy,commercial banks act as investors and mediators in the capital mobility process.Capital mobilization is one of the most crucial fundamental tasks for each bank, and commercial banks are diversifying their activities to satisfy the market's demands to the fullest The foundation for the growth of credit activities is mobilized capital, which also ensures the security of the bank's overall operations However, commercial banks also encounter numerous challenges when trying to raise money due to the COVID-19 epidemic's effects, production and commercial challenges, low deposit interest rates, etc…
For Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) – Thu DoBranch, increasing capital mobilization with resonable and high stable cost is a very urgent issued But nowadays, despite of a certain success, the bank has to face many difficulties and limitaions Without increasing capital mobilization, it will be difficult for the bank to develop as well as maintain its position Because mobilized capital plays a significant role in economic development, it is crucial to research theoretical issues, assess, and evaluate the situation to choose the best course of action that will enable the bank to make more money, improve competitiveness and expand quickly.Understanding the importance of capital mobilization in bank activities, the author decided to choose the topic: “Solutions to enhancing the efficiency of capital mobilization at Sai Gon Thuong Tin Commercial Joint Stock Bank - Thu Do Branch”.
Aims of the study
The purpose of the thesis is to clarify theoretical concerns with capital mobilization and its importance of it for commercial banks, as the basis for practical research. Additionally, the topic also analyzes the current situation circumstance of Saigon Thuong Tin Commercial Joint-stock Bank- Thu Do Branch It identifies as well as evaluates some of the problems that the banks must resolve By analyzing that strategy, the writer will systematize the fundamental theories of capital mobilization efficiency of commercial banks, evaluate the current status of effective capital mobilization at the
Sacombank – Thu Do Branch, and then, propose solutions to improve the efficiency of capital mobilization.
Scope of the study
The scope of the study includes includes the spatial scope and the time scope The spatial scope of the research topic is carried out at Saigon Thuong Tin CommercialJoint stock Bank (Sacombank)- Thu Do Branch and research data of the topic was collected from the bank within 3 years from the period 2019-2021.
Methodology
To carry out this research, the writer used available data, which is issued and maintained by the bank In addition, the author also conducted his own study, survey and statistics on problems linked to the research’s subject matter.
The research methods used in the thesis include statistical, interpretive, inductive methods, methods of analysis, synthesis based on available documents of the unit,method of comparison, modeling, methods of sociological investigation,etc.
Organization of the study
The thesis has a layout of three chapters, presented from theoretical and practical situations to recommendations Specifically, the chapters are as follows:
Chapter 1: Basic principles of capital mobilization activities of commercial banks. Chapter 2: The study of capital mobilization activities at Saigon Thuong Tin Commercial Joint stock Bank (Sacombank) – Thu Do Branch.
Chapter 3: Recommendations to enhancing the capital mobilization at Saigon ThuongTin Commercial Joint stock Bank (Sacombank) – Thu Do Branch.
LITERAL REVIEW
GENERAL OVERVIEW OF COMMERCIAL BANK AND CAPITAL MOBILIZATION
Banking plays an important role in the financial life of a business and it can be seen as the life-blood of the modern economy It is necessary for trade and industry Although no wealth is created by banks, their essential activities facilitate the process of production, exchange and distribution of wealth
The term “bank” has been defined in various ways by different economists For instance, the World Bank defined “banks are financial institutions that accept funds in form of deposits repayable on demand” or on the short notice, Prof Kinley says “Bank is an establishment which makes to individuals such as advances of money or other means of payments as may be required and safely made for use” Commercial banks are defined as a form of oriented profit-seeking business institution entitled to carry out all banking activities and other related activities Lending activities can be directly performed by the bank or indirectly through capital markets A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of money for the general public, providing loans for investment and other such activities These banks are profit-making institutions and do business only to make a profit Commercial banks not only provide consumers with an essential service but also help create capital and liquidity in the market Commercial banks ensure liquidity by taking the funds that their customers deposit in their accounts and lending them out to others.
The two primary characteristics of a commercial bank are lending and borrowing The bank receives the deposits and gives money to various projects to earn interest or make a profit Commercial banks' primary goals are to offer financial services to the general public and to businesses, both of which contribute to the maintenance of economic stability and economic progress.
Commercial banks are financial organizations that serve various economic purposes In the process of meeting economic and social needs, it serves a number of sectors' financial needs These are some basic functions of commercial bank.
As a financial intermediary, a commercial bank provides financial services to organizations of varying sizes To do so, they offer a wide variety of business-centric products and services They are critical to any economy that relies on business credit and its creation Banks act as financial intermediaries because they stand between savers and borrowers They provide specialized financial services, which reduce the cost of obtaining information about both savings and borrowing opportunities A commercial bank accepts deposits from customers and in turn makes loans even in excess of the deposits The most important function of commercial banks is to accept deposits from the public Various sections of society, according to their needs and economic condition, deposit their savings with the banks For example, fixed and low- income group people deposit their savings in small amounts from the points of view of security, income and saving promotion On the other hand, traders and businessmen deposit their savings in banks for the convenience of payment It thus functions as a mobilizer of saving in the economy.
Besides, in addition to taking loans from the general population, commercial banks also extend credit The costs associated with bank lending are always passed on to the borrowers Banks generate a profit by requiring interest be paid on the loan, which is what they must do The primary way that banks make money is by charging interest to borrowers Banks advance loans based on deposits made into borrowers' accounts as well as public deposits, so they don't just give loans based on public deposits alone A commercial bank primarily makes money by issuing loans and collecting the accompanying interest fees from the borrowers So that, a bank functions as a reservoir into which household savings and idle surplus funds flow Therefore, loans are made to businesspeople and other borrowers at interest to fund investments or other productive purposes.
1.1.1.2.2 Act as agent of payment.
An important function of banks is the provision of a mechanism of payment and transfer of funds Transferring balances among accounts is an activity that banks perform, upon receipt of checks issued by deposit holders Bank provides a payments and collection mechanism primarily to attract deposits A bank acts as an agent to its customers for various services like: Collecting bills, drafts, cheques Paying the insurance premium, rent, loan installments, etc Working as a representative of a customer for purchasing or redeeming securities in the stock exchange Individuals and businesses seek to partner with banks to support their day-to-day cash management and other financial transaction needs The agent bank helps in managing funds maintained in a deposit account by these entities The agent banks also support customers through letters of credit or extensions of new credit facilities The typical service offerings of an agent bank would include services, such as back-office operations, processing of credit applications, payment management, verification services, and handling complaints.
The process of making money demonstrates the nature of a commercial bank, which seeks to make a profit The banking system's commercial operations, each of which has unique traits, work together to generate new money for the bank and the economy. Commercial banks have fulfilled the requirements of social payment and payment as well, thanks to their role in money creation This increases the amount of money available to meet the demands of circulation and economic growth.
1.1.1.3 Role of commercial bank in the economy
Commercial banks play an important part in performing the balanced function in an economy For instance, if commercial banks cease to perform these banking functions, then the economy will collapse out of thirst for money liquity A well-developed banking system is essential for the economic growth of a country The activities in the economy may be difficult to smoothly happen without a sound system of commercial banking Commercial banks are considered the backbone of the economy Along with the growth, economic and social stability will be shattered completely.
Encouragement to the investment in new enterprises: Today, the majorityof enterprises employ mobilized cash for investments and operations after establishing their viability and reputation over time Because not every business has sufficient fixed capital available for commercial operations Hence, in order to increase the range of company activities, mobilized money is very essential Moreover, innovations are an essential prerequisite for economic development These innovations are mostly financed by bank credit in developed countries But in underdeveloped countries, entrepreneurs hesitate to invest in new ventures and undertake innovations largely due to lack of funds Facilities of bank loans enable entrepreneurs to step up their investment in innovational activities, adopt new methods of production and increase the productive capacity of the economy.
Implementation of Monetary Policy: An appropriate monetary policy is necessary for economic progress A strong banking sector is a requirement for the efficient application of monetary policy Without the nation's banking system's active cooperation, the monetary authority cannot control and regulate credit The nation's central bank actively coordinates with the banking system to control and regulate the volume of credit In the shortest amount of time feasible, it fosters economic growth and aids in bringing price stability.
Accelerating the rate of capital formation: Existence of a sizable unmonetized sector is a sign of an underdeveloped economy The country's economic development is hampered by the existence of this unprofitable sector The banks can lessen the exchange of products through barter and advance the monetization (conversion of debt into money) process in the economy by opening branches in rural and underdeveloped areas Thanks to the increasing use of money in business transactions, the volume of production of goods sharply rises.
There are two main typical operations of commercial banks: capital mobilization and capital utilization.
Capital mobilization is an activity of an enterprise to raise more capital for its business.
By increasing the charter capital and the capital from other sources, the enterprise has been doing capital mobilization itself Capital mobilization is vital to both commercial banks and the entire economy Commercial banks are allowed to use legal tools and methods to mobilize idle financial sources in society for the purpose of providing credits and making loans.
Capital utilization is a primary banking operation reflecting the process of using funds to ensure business safety, avoid risks and seek profits Capital utilization includes the particular operations:
Credit creation of commercial banks aims at seeking profit but these activities need to provide safety in order to preserve public confidence in the banking system In case customers want to withdraw money, banks should set aside a portion of the money to meet their cash demands and ensure solvency This portion of unused capital is known as reserves.
Money is provided by banks to manufacturers and traders Moreover, they produce or create money Deposits in banks are viewed as currency They are equivalent to money After being reserved, the remaining capital may be given to people or organizations The basic activities that go into credit generation include:
EVALUATION CRITEIA OF CAPITAL MOBILIZATION
1.2.1 Scale of capital and capital growth rate
Capital mobilization cannot be effective when the mobilized capital does not reach the certain scale according to the bank's mobilization plan or cannot meet the needs of the bank's capital volume for business The scale of capital mobilization is assessed through the criterion of total capital mobilization balance which is credit balance of different types of deposits at a time or on average for each period The bank will be able to increase its business operations, boost liquidity, and increase capital stability thanks to the significant capital mobilization By comparing the total amount of capital mobilized by commercial banks over the years at specific points, such as on the last day of the month in a year, or quarterly in a year, or in between years, or at the end of years, it is possible to assess the magnitude of capital deployed by commercial banks. The growth rate of mobilized capital is determined by the following formular:
The growth rate of ¿ ∑ Mobilized capital∈this period−∑ Mobilized capital∈previous period
∑ Mobilized capital∈previous X100 mobilized capital
On the one hand, scale of capital is an absolute indicator and if it is used alone, it does not fully reflect the bank's ability to mobilize capital Many relative indicators are established based on the capital scale requirements These indicators clearly demonstrate the ability of commercial banks to raise capital As the bank cannot predict or control the cash inflow and outflow, it will be challenging for the bank to decide whether to lend or invest once a significant amount of capital has been mobilized As a result, the bank is now interested in the stable growth of the capital that has been mobilized
Each different type of deposit will have different requirements in terms of cost, duration, etc and funding the appropriate assets The bank's asset structure and cost decisions will be impacted by the modification in mobilized capital structure. Therefore, it will be able to reduce input costs and manage risks by explicitly specifying the structure Comparing the structure of the capital that has been mobilized by object, term, and currency with the corresponding lending and investment requests is important to determine whether the capital mobilization process has been successful.
To quickly satisfy the lending, investment, or payment demands of businesses and the general public, each bank must create a capital source strategy for each period that includes a plan to scale up each source and the flexibility to adjust the source structure. The proportion of each source of mobilized capital is determined by the following formular:
Proportion of each source of ¿ Mobilized capitaltype i
This formular represents the target on the structure and proportion of mobilized capital that gives us an overview of the bank's mobilized capital structure It shows currently how much each type of capital accounts for over the total mobilized capital Moreover, a reasonable mobilized capital structure must have a balance with the demand for capital about both terms and currencies If the capital demand is mainly for medium and long-term loans and investments, a large proportion of short-term mobilized capital is unreasonable However, the capital structure may change from time to time and match with different capital demands.
Moreover, mobilized capital source from residents and businesses account for a large proportion of total capital This source usually accounts for more than 50% of total capital, banks can operate thanks to this capital and it is the annual growth target of banks But capital mobilization from residents and businesses is an unstable source of capital because customers can withdraw their money without being tied even if it is an undue term deposit, so the bank needs to maintain a liquidity reserve to meet customer withdrawal needs However, it is still the source of capital with fierce competition among commercial banks because it helps to grow credit and from that, the banks must increase capital mobilized from residents and businesses.
The most fundamental cost is the cost of raising capital, which includes customer interest payable This is followed by costs associated with raising capital, such as printing, issuing, collecting, and checking costs, as well as the cost of developing new products, including marketing, advertising, and customer service expenses Interest cost is the interest calculated according to the deposit interest rate that the bank pays to the customers Banks can mobilize more money by charging their clients a higher interest rate, which allows them to increase lending and investment High interest rates will, however, drive higher expenses, and if income can't keep pace with expenses, it will cut into the bank's profit Hence, it is crucial to determine the fair cost of capital mobilization for each time period.
Average cost of mobilized capital is determined by the following formular:
Average cost of mobilizing capital ¿ Cost of mobilizing capital
In principle, the lower this ratio is, the higher the efficiency of capital mobilization is and when comparing between reporting periods, if the next period is lower than the previous period, it means that the bank has saved costs and improved efficiency of mobilizing capital The interest rates of commercial banks are relatively similar so they often use the average cost method according to the original cost they often use the average cost method according to the original cost This method has the advantage of assessing the capital situation in the past Average cost method according to the original cost is determined by the following formulas:
Average interest cost ¿ Interest cost
Costs set to cover interest expenses ¿ Interest cost
Cost to break even ¿ Interest cost+Other costs
1.2.4 Relationship between captial mobilization and capital using
In order to boost capital mobilization, the commercial bank takes into account the amount of capital used Capital mobilization is effective when the capital and growth of capital of a certain scale and structure are allocated to suitable earning assets By comparing the total loan and investment balance with the total mobilized capital to see how the mobilized capital has been used The relationship between capital mobilization and the use of mobilized capital is determined through the following criteria:
Rate of using mobilized capital ¿ Total credit loans∧investments
Total mobilized capital X100The scale between capital mobilization and capital using, the growth rate of capital mobilization in comparison to the growth rate of capital using, the terms of capital mobilization and capital use, and the structures of capital mobilization by currency and capital use by currency all serve to illustrate the relationship between these two financial concepts If the entire mobilized capital is used up for lending and investment but the bank’s lending and investment demands have not been fully met, the use of mobilized capital is good but the capital mobilization is not equivalent worthy, not well meeting and therefore need to increase capital mobilization to meet lending and investment demands Regarding the scale of capital mobilization, it must be larger than the use of new capital to ensure the rationality in the policy of increasing mobilization at commercial banks, the growth rate of capital using is higher than the growth rate of deposits in the long period will cause imbalance between capital mobilization and capital using, in terms of capital capital using term, it is mainly long-term, it is necessary to increase long-term capital mobilization and vice versa, balance between the use of capital by currency to enhance mobilizing capital in that currency.
1.2.5 Different between average interest rates and average saving interest rates
In the business activities of the bank, the main source of income is interest income and the main cost of the bank is interest cost Bank profitability only increases when the average return on assets must be greater than the average interest rate on capiltal. Capital mobilization is effective when the capital and growth of capital of a certain scale and structure are allocated to suitable earning assets The difference between average lending interest rates and average deposit rates can be used to evaluate the results of capital mobilization by the following formular:
Average loan interest rate ¿ Income ¿ laonactivities ¿
Average loan interest rate ¿ Interest cost
Total mobilized capital X100 (%) Interest different = Average lending rate – average deposit rate
The conditions for increasing the bank's business results are more favorable than the better the above criteria are Difference under 0 is good and above 0 is not good The evaluation of capital mobilization results must be done regularly and periodically in the management operations of the bank in order for the bank's company to grow It can be used in conjunction with a variety of other qualitative indicators, such as the capacity to access capital from the State Bank or the availability of capital on the money market, in addition to the quantitative indicators listed above, in applications.
1.3 FACTORS INFLUENCING THE RELEVANT ISSUE
1.3.1 Methods of mobilizing capital of commercial banks
A commercial bank accepts deposits in the form of current, savings, and fixed deposits.
It collects the surplus balances of Individuals, and firms and finances the temporary needs of commercial transactions The first task is, therefore, the collection of the savings of the public The bank does this by accepting deposits from its customers. Deposits are the lifeline of banks Deposits are three types as under:
Fixed deposits (Time deposits): Fixed deposits have a fixed period of maturity and are referred to as time deposits These are deposits for a fixed term which is a period of time ranging from a few days to a few years These are neither payable on demand nor they enjoy cheque facilities They can be withdrawn only after the maturity of the specified fixed period They carry a higher rate of interest They are not treated as a part of the money supply Recurring deposit in which a regular deposit of an the agreed sum is made is also a variant of fixed deposits.
Savings account deposits: These are deposits whose main objective is to save A savings account is most suitable for individual households They combine the features of both current accounts and fixed deposits They are payable on demand and also withdrawable by cheque But the bank gives this facility with some restrictions For instance, a bank may allow four or five cheques in a month Interest paid on savings account deposits is lesser than that of fixed deposits.
THE STUDY
GENERAL OVERVIEW OF SAI GON THUONG TIN COMMERCIAL
2.1 GENERAL OVERVIEW OF SAI GON THUONG TIN COMMERCIAL JOINT STOCK BANK – THU DO BRANCH
2.1.1 Process of formation and development
Saigon Thuong Tin Commercial Joint Stock bank is a commercial joint stock bank incorporated in the Socialist Republic of Vietnam The bank was established and operated in accordance with Banking License No.111/GP -NHNN issued by the StateBank of Viet Nam on 9 November 2018 replacing Banking License No.0006/NH-GP dated 5 December 1991, Business Registration Certificate No.0301103908 dated 13January 1992 and other amendments issued by Ho Chi Minh Department of Planning and Investment On December 21, 1991, Saigon Thuong Tin Commercial Joint StockBank was founded on the merger of four credit institutions: Go Vap EconomicDevelopment Bank, Lu Gia Credit Cooperative, Tan Binh, and Thanh Cong Credit Co.The bank's objectives are to raise capital, extend credit, and carry out banking services.The Bank's Head Office was located at 266-268 Nam Ky Khoi Nghia building in 2008.After more than 30 years of operation, Sacombank has now become one of the leading joint-stock commercial banks in Vietnam with charter capital as of June 30, 2022 is18,852 billion VND and equity is 35,798 billion VND Sacombank has come a long way in its quest to become the dominant bank in Vietnam Since it was founded,Sacombank has come a long way to become the top bank in Viet Nam As a pioneer bank, Sacombank is taking advantage of technology and modern service distribution channels as a competitive advantage to satisfy customers' needs The event thatSacombank officially listed shares on the Ho Chi Minh City Stock Exchange on financial market Sacombank is the first bank in Vietnam to list shares on the stock market The bank also launched a strategy to develop banking services for cross-border transactions, establishing a branch in Laos on December, 2015 and a branch in Cambodia on June, 2009.
On that basis, Sacombank-Thu Do Branch was established as the result of an improvement The branch’s head office is located at 88 Ly Thuong Kiet, Cua Nam Ward, Hoan Kiem District, Ha Noi This is a spacious, modern and most prestigious headquarters in Ha Noi That is also an advantage and a solid premise for the branch to develop sustainably in the following years With a diversified product and service system and a young workforce, enthusiastic employees, Sacombank Thu Do Branch has been meeting the diverse financial transaction needs of its customers including individuals and businesses in the area.
Sacombank – Thu Do Branch will provide best-in-class comprehensive financial solutions for customers It also maximizes added-value to stakeholders, creates value and prosperity for employees as well as contribute to the development of society and community.
Sacombank - Thu Do Branch serves as a central location for carrying out a variety of operations that have been approved by the Bank and are directed by the General Director of the Bank.
The bank is a dependent accounting unit and it has a balance sheet and its own seal for transactions in accordance with the law, directly doing multi-functional business inHanoi
From the prescribed functions, Sacombank - Thu Do Branch has the following specific tasks:
Mobilizing capital in many forms: lending (short, medium and long term); provide payment facilities and payment services; forex trading; business banking services such as card services, discounting valuable papers.
Head of cash management of the Bank: receiving investment trust funds from the government, economic organizations and individuals at home and abroad and participate in co-financed projects; monitor and account for the investment trust capital of the Bank.
Investment in other forms: Fund raising, joint venture, share purchase and other forms of investment
2.1.1.4 Products and services provided by Sacombank
The following deposit products are those that Sacombank currently uses:
+ Save gold and secure VND in gold price
At the moment, consumer lending is the branch advantage that many banks concentrate on utilizing Currently, the bank provides consumer loan products including:
+ Loan for production and business (customers are businesses)
+ Loan for production and business (customers are individuals)
+ Lending to market business households
Sacombank – Thu Do Branch has some departments which is issued by the board of director: Accounting and Funds Department, Administration Department, CorporateDepartment, Support Department and Personnel Department.
Figure 2.1: Organization structure of Sacombank- Thu Do Branch
Phòng Kế toán và Quỹ Bộ phận Quản lí tín
Bộ phận Tiếp thị Cá
Bộ phận Thẩm định cá nhân
Xử lí giao dịchPhòng
THE CURRENT SITUATION OF CAPITAL MOBILIZATION OF
2.2.1 Capital scale over the years from 2019 - 2021
Over the recent years, capital mobilization of Sacombank has experienced a volatile period There are many things such as high flation, liquidity pressure, etc that have affected the capital as well as among all competition of the bank.
Table 2.1: Capital scale over the years from 2019 to 2021 ( Source: Notes to the consolidated financial statement (FS ))
Amount Amount Amount Amount Portion
This figure describes Sacombank – Thu Do Branch’s capital scale during the three recent years from 2019 to 2021 Overall, all the capital criteria from 2019 to 2020 prefer to increase whereas from 2020 to 2021 almost figures decrease except for the rise of capital of credit stitution and total owner’s equity The bank has to go through many obstacles when the economy is in the global economic crisis and disease Around that period, the covid epidemic started to emerge and spread over the globe The economy has suffered enormous damage as a result of having to close off the entire city to stop the sickness from spreading, etc.
Firstly, the shareholders’ equity was at VND 7,728,589 million in 2019 and in the next year, there was a slight increase trend of almost VND 1,722,299 million, accounting for 0.223% compared to the last year Whereas between 2020 and 2021, the shareholders’ equity decreased by 0.038% from VND 9,450,888 million to VND 9,090,431 million It is the negative consequences of economic meltdown that caused the decline in the total shareholders’ equity Therefore, the shareholders’ equity shows a decreasing trend in three years 2019, 2020 and 2021 It is the negative consequences of economic meltdown that cause the decline in the total shareholders’ equity.
Secondly, there is also a downward trend in the capital of credit institutions The authorized capital of Sacombank – Thu Do Branch was increased by 0.519%, from VND 5,528,610 million in 2019 to VND 8,400,607 million in 2020 Then, in the next year, it fell by VND 47,915 million, accounting for 0.005%, in comparison to the year
2019 Indeed, aware of the importance of the authorized capital, the bank has actively requested in order to boost the capital As it represents the financial and safe capital sufficiency ratios, Sacombank - Thu Do Branch's action can be considered as beneficial because it will enable the bank to expand its business activities and quickly respond to unforeseen circumstances The bank has carefully thought out how to handle unforeseen circumstances in the financial crisis.
In addition, as can be seen from the table, the amount of bank reserve stood at VND381,583 million at the end of 2019 and rose to VND 410,670 million in 2020 The growth rate from 2019 to 2020 of fund of credit institution increase by 0.076%; however, at the end of 2021, this figure witnessed a rise of VND 56,841 million, equivalent to 0.138% Therefore, fund of credit institution shows an upward trend over three years Because of dealing with unforeseen circumstances in a financial meltdown, an economic decline from social distancing and cover losses sustained during regular company operations, Sacombank – Thu Do Branch has put more effort and actively increasing its reserves.
Besides, retained earnings go through a period of unstable activity and the trend is becoming downward As can be seen from the table, starting at VND 417,423 million at the end of 2019, the retained earnings grew sharply by particularly 1.676%, hitting a high of VND 699,645 million at the end of 2020 Additionally, by the end of 2021, it reaches a low point of VND 265,928 million From 2020 to 2021, there is a drop of over 0.619% The noticeable decrease in Sacombank – Thu Do Branch’s retained earnings between 2020 and 2021 is attributed to the decision to raise its reserves when the economic has to face with the outbreak of COVID-19 pandemic which cause economic downturn, company bankruptcy, unemployment, etc It is huge challenging for the bank to proceed and maintain security.
2.2.2 Analysis of capital mobilized structure of sacombank – Thu Do Branch Table 2.2: Structure of mobilized capital according to methods of mobilizing
( Source: Notes to the consolidated financial statement (FS ))
Deposits and borrowings from other credit institution
Other borrowed and enfrusted funds 1,271,144 1.185 145,363 0.149 -877,096 -0.691 -248,985 -0.631
This table 2.2 decribes an overview of the total mobilized capital and the mobilized capital structure according to methods of mobilizing It is clear from the table that the total mobilized capital declines steadily over the 3 years The whole amount of money that had been mobilized has slowly decreased by VND 4,471,409 million from VND 107,285,208 milliom at the end of 2019 to VND 102,813,801 million at the end of
2020) This drop represented 4.18% of the total amount of capital that has been mobilized At the end of 2012, the total amount of capital that has been mobilized had gradually decresed by VND 5,222,351 million, equivalent to 4.8% The table reveals that the majority of the categories for mobilized capital is falling The decline in the total mobilized capital is attributed to the decrease in each mobilized capital criterion. Like numerous commercial banks in the banking industry, Sacombank – Thu Do Branch is unable to escape the negative effects of the financial crisis, which makes actions involving raising capital more challenging Because it limits the bank's ability to expand its activities, the decline in total mobilized capital can be seen as a poor indication for Sacombank – Thu Do Branch
On the one hand, the amount of deposits from customers has the largest portion in the mobilized capital of Sacombank – Thu Do Branch and then, it is followed by the deposits and borrowings from other credit institutions The entire amount of public deposits in 2020 reached VND 62,294,523 million, up to 16% compared with the year
2019 The increase in customer deposits is encouraging for Sacombank – Thu Do Branch since it demonstrates the bank's popularity and standing in the community. Although this is a difficult time when the economy is severely reduced due to the COVID-19 pandemic, the bank has had to make a lot of efforts to adapt and solve this problem As a result of the pandemic, especially in the year 2020 and the first half of
2021, the bank had to modify a number of its policies such as encouraging customers to use social media for helping and support purposes in order to meet demands of customers as well as to work online to help prevent the spread of COVID-19. Moreover, the bank also pays attention to developing alternative channels, especially electronic ones, to bring customers the highest convenience and flexibility In addition to these internal factors mentioned above, it should be taken into consideration other external reasons contributed to the increase in the deposits of customers In 2021, most investors could not seek profit from other types of investment For instance, the gold market experienced a fever, in which the gold price rocketed The real estate market was overshadowed because it is virtually frozen with very few transactions The collapse and default of numerous businesses was followed by the sharp decline in the price of many different types of equities painted a gloomy picture of the security market The public's changing behavior may be caused by all these market variations. Instead of choosing other forms of investment, people made the decision to put their money in the bank in order to avoid the market risks Savings may be a safe way in a chaotic economy.
At the end of 2021, total public deposits decrease to VND 59,589,516 million, up to 4.35% decrease compared to the figure Nevertheless, these customers’ deposits still make up the majority which accounts for 61% of the total capital that Sacombank – Thu Do Branch has mobilized
Based on the above chart, deposits and borrowings from other credit institution accounted for a large portion in the mobilized capital structure In 2020, the deposits and borrowings from other credit institution declined by 10,528,357 million ( from VND 33,358,864 million to VND 22,830,507 million), which was equivalent to 31.56% compared to the year 2019 Howerver, at the end of the year 2021, the deposits and borrowings made a rapid recovery, which reached at 30,234,984 million.
On the one hand, mobilized capital from issuing valuable paper witnessed a significant decline over the past three years from 2019 to 2021 The amount reaches at 12,195,320 million at the end of 2019, continues to drop to 7,178,500 million in 2020 then declines by more than three times to 2,295,002 million in 2021 This was the time that banking sector has coped with many challenges such as nonperforming debts or wild fluctuations of interest rates People tend to keep their cash in hand rather than deposit them in the bank It is an obstacle to deposit mobilization of Sacombank – Thu Do Branch.
2.2.3 Result of capial mobilization at sacombank – thu do branch
2.2.3.1 Borrowings from the Government and the State bank of Viet Nam (SBV)
Table 2.3: Borrowings from the Government and SBV over three years ( Source: Notes to the consolidated financial statement (FS ))
Amount Amount Amount Amount Portion
EVALUATION OF CAPITAL MOBILIZATION ACTIVITIES AT
2.3.1.1 Utilized different terms of deposits from other institutions
In 2019 and 2020, the situation of capital mobilization was difficult, the bank has to proactive and adjust quickly to adapt the situation Thus, in 2019 and 2020, the advantage of the bank is that taking advantage of terms of deposits from other institutions The total amount of deposits from other institutions was a light decrease in
2021 In 2019 and 2020, it still increase from VND 48,199,088 million to VND 40,702,356 million and after that, it increast by VND 35,231,840 million in 2021 compared to the previous year.
Sacombank – Thu Do Branch has also utilized different terms of deposits and flexible interest rates for public deposits, which offers customers various selections The bank has proactively developed cooperative relationships with financial institutions to promote its products and services through customer conferences and furthermore to develop specialized financing program As a result, the borrowings and deposits from other credit institutions increase remarkably Besides, they has started paying more attention to strengthening its marketing strategies and advertising campaigns to promote the brand image The brand image promotion also greatly contributes to motivating the capital mobilization activities.
2.3.1.2 Take advantage of methods of fund mobilization
Different methods of fund mobilization such as valuable papers issued, etc accounted for a larger proportion of the total capital The total amount of mobilized capital was a light decreasing in 2020 from VND 107,285,208 million in 2019 to VND 102,813,801 million in 2020 and still decrease continuously at VND 97,591,448 million in 2021
The bank has tried to diversify methods of fund mobilization to improve the efficiency of this activity In order to satisfy the demands of various consumers, Sacombank – Thu Do Branch produced and marketed a variety of inventive deposit products as well as adjusted policies to adapt to current economic circumstances Products from Sacombank – Thu Do Branch are well regarded since they are welcoming, practical, cutting-edge, and expert In order to make it easier for consumers to make payments, the bank has also concentrated on updating and expanding the banking network. Customers have a variety of options thanks to Sacombank – Thu Do Branch’s use of varied deposit terms and adjustable interest rates for public deposits Moreover, the bank also has to proactively cooperate relationships with financial institutions to promote its products and services through customer conferences and furthermore to develop specialized financing program As a result, the borrowings and deposits from other credit institutions increase remarkably.
2.3.1.3 Focusing on increasing the number of personnal customers
On the one hand, along with improving the quality of its services and maintaining positive relationships with its regular clients, Sacombank – Thu Do Branch is constantly looking for new clients and cultivating relationships with those who have never used a bank before Thus, as time passes, the number of customers also grows gradually Besides, thanks to the vast and widespread introduction of a new business model throughout the system in the setting of an unstable economy and monetary market, Sacombank – Thu Do Branch is able to take decisive action to overcome obstacles, guaranteeing development rate and seriously adhering to the policies of the government Additionally, as can be seen, the number of personal customers has gradually increased recently, reflecting the bank's efforts to increase the number of retail banking services it offers Therefore, the bank constantly makes efforts to enhance the product and build relationships with new–to–bank customers
2.3.1.4 Take advantge of deposits of customer deposits
The global economic crisis and disease have caused a period of instability in the international economy in general and the economy of Vietnam in particular The banking industry has overcome a plenty of obstacles Moreover, like many commercial banks in financial system, Sacombank – Thu Do Branch is unable to escape the detrimental effects of market rivalry and economic insecurity However, Sacombank – Thu Do Branch has still obtained encouraging achievements, reflecting its relentless efforts.
To begin, despite the economic instability, the mobilized fund structure of Sacombank – Thu Do Branch consists largely of customer deposits, which also tend to grow in size and proportion Growth in public deposits might be seen as a positive aspect of MSB because it helps to keep mobilized money stable.
2.3.2.1 The unbalanced of mobilzed fund
Particularly the classification of mobilized funds by terms and forms of money shows an imbalanced structure Demand deposits only make up a small portion, however term deposits make up a large portion The structure and growth rate of capital that has been deployed are therefore unstable Additionally, mobilization deposits in VND greatly outpace those in gold and other foreign currencies, which is expected to have an impact on the bank's global payment A little piece of the fund is mobilized by issuing valuable papers, and its amount tends to steadily decline It shows that this strategy of raising capital is ineffective and that Sacombank – Thu Do Branch is not interested in issuing bills and certificates of deposit to raise money.
The reason for this limitation is that erratic fluctuation in the economy has dramatically impacted Maritime Bank’s capital mobilization High inflation rates, currency depreciation, business climate instability, mergers and acquisitions of some commercial banks, and significant financial scandals inside the banking sector are obstacles that Sacombank – Thu Do Branch must overcome in order to raise funds.
In the structure of mobilized capital, borrowings from other banks and credit institutions make up a sizable component The interest rates on these loans are typically quite high Obtaining capital through borrowing from other credit unions may be risky and result in debt for the Sacombank – Thu Do Branch Additionally, the costs associated with capital raising activities are very high and account for a sizable portion of Sacombank – Thu Do Branch's overall business costs It is detrimental to banking operations These costs are insufficient given the rate of increase of the mobilized fund.
It suggests that cost-serving fundraising hasn't been applied properly Although there is a sharp increase in spending on infrastructure improvements for banks, these funds are not used effectively.
The reason for this limitation is because of erratic fluctuation in the economy and the interest rate policy The policy of depositing interest rates decreases while lending rates gradually increase, with this interest rate policy Sacombank – Thu Do Branch will face many difficulties in mobilizing capital and competing with other banks
Competition between commercial banks is not healthy and lack of cooperation leads to discipline, discipline, policies and laws in banking activities are not respected The goal of pursuing profit has overwhelmed the requirements to ensure business safety and violate the law on monetary activities and bank credit The method of competition is mainly by price or interest rate, unhealthy and not attaching importance to service quality Along with weak governance capacity, low business ethics in banking increases the level of operational risks and legal violations in the banking and finance sector.
The reason for this limitation is that competition is an unavoidable rule in the market economy The commercial bank plays a crucial role as contemporary society develops as a financial organization With the emergence of numerous banks and financial institutions in recent years, the banking industry has been experiencing growth The Thu Do Branch of Sacombank has developed a marketing plan to draw clients and grow market share Fierce competition from other banks in the financial market is an extreme threat to Sacombank – Thu Do Branch, which obstruct its capital mobilization.
Financial infrastructure has not effectively supported the safety and soundness of commercial banks in general and Sacombank – Thu Do Branch in particular To be more specific, the commercial banking system's degree of information technology adoption is still low, has a significant gap compared to many other nations in the region and throughout the world, and hasn't kept up with the demands of the actual use and development of information technology Moreover, when compared to many nations in the region and around the world, the commercial banking system's level of information technology adoption is still poor and lags far behind.
The reason for this limitation is that business activity of Sacombank – Thu Do Branch under the impact of global economic crisis and disease cannot take place smoothly.During the period of 2019 and 2021, the COVID-19 pandemic has created a series of simultaneous and reinforcing shocks that has exposed and exculpated economic,causing a direct impact on business operations To stop COVID-19 disease from spreading, the entire city even had to lock down, forcing all activity to cease At that time, the economy was seriously impacted Therefore, it is no doubt that there is a steady decrease in both shareholder’s equity and mobilized capital, which results in the fall in total owner’s equity The decline in total bank capital can be seen as an ominous sign for banking operations as it may restricts the extension of the bank Mobilized fund reduction may heavily impact on bank’s financial capability and business results.
RECOMMENDATIONS
BUSINESS ORIENTATIONS OF SACOMBANK – THU DO BRANCH
A commercial bank serves as an economic intermediary and provides capital to practically all economic agents A significant component of the commercial bank's capital structure is made up of mobilized funds, which are a crucial and consistent input to the functioning of the bank's business The mobilized fund is of utmost importance for commercial banks, which control business outcomes and directions As mention, mobilized fund plays a decisive role in banking operations Suffering from a period of financial market and economic volatility, Sacombank – Thu Do Branch has made a great effort to overcome challenges and obtain its strategic objective Additionally, based on strict compliance with the legal regulations of the State Bank, the bank has concentrated its resources to achieve all-encompassing development In order to achieve the strategic goals, Sacombank – Thu Do Branch has provided business orientations based on an examination of real-world circumstances and a determination of the force and capability that exist inside the bank.
To encourage the use of international standards in business management and risk management application forms.
To further invest in advanced and integrated banking technology, which is continuously updated together with the general development of information technology.
To further expand the network of transaction offices along with a modern and professional self- service system.
To improve service quality and expand customer network.
To aggressively implement business measures and plans with a view to obtaining the target of becoming one of the best commercial banks with strong financial potential and the most efficient performance in Vietnam.
To promote the development of sustainable and high-quality human resources on the basis of a harmonized combination of international experience and domestic capacity with competitive preferential treatment, salary and bonus.
To promote the launch and provision of banking services in the direction of increasing friendliness, professionalism, convenience and modernity.
Setting clear objectives is crucial for banks to achieve their business goals In order to achieve sustainable growth, it will also keep developing profit and development strategies with caution in mind Rather than owning the broadest range of assets, the bank seeks to increase the effectiveness of company operations.
SOLUTIONS TO ENHANCING THE EFFICIENCY OF CAPITAL
3.2.1.1 Diversifying types of capital mobilization products
Diversifying types of product plays an important part in enhancing mobilization as well as meet various demands of different types of customers and improve the structure of capital However, there are still some obstacles that can directly effect on the bank’s decision The following actions can be taken by the bank to get around these restrictions:
Firstly, mobilized fund in the form of foreign currencies represents a small proportion in the structure of mobilized capital Sacombank – Thu Do Branch should encourage mobilized funds in foreign currencies because it plays a critical role in international payment Moreover, the bank ought to introduce new deposit products to mobilize foreign currencies and also needs to adopt suitable policies to avoid foreign exchange risks.
Secondly, Sacombank – Thu Do Branch should proactively access individuals as well as business entities to mobilize funds They can acttract more customers and expand the capital structure by giving special offers to or giving reasonable interest rates for these demand deposits.
Thirdly, saving deposits account for a great proportion in the mobilized fund structure and play a significant role in Sacombank’s capital By developing various types of savings based on specific reasons, Sacombank – Thu Do Branch needs to encourage more public saving deposits in the future For instance, savings for building a house, savings for retirement, savings for traveling, etc The bank should also use adjustable interest rates to draw in additional customers.
Interest rate is an vital tool for commercial bank to attract capital form individuals, business entities and other credit institutions Changes in interest rates can have a significant impact on the bank's financial performance Before selecting to deposit money in the bank, the majority of consumers weigh the interest rate as an important consideration
The main cost of doing business for commercial banks is interest rate, which has a direct impact on banking activities Commercial bank interest rates have fallen significantly in recent years as a result of tight monetary policy and the economic slump, which has caused a downward trend in capital that has been mobilized To overcome these limitations, the company can take a number of steps as follow:
Firstly, it is necessary for the bank to form a right interest rate policy Formulating the right interest rate policy not only enhances competitiveness of Sacombank but also guarantees its liquidity, solvency and profitability The bank should cautiously consider some affecting factors such as compliance with the monetary policy and interest rate of the central bank, interest rate policies of other competitors on the market, the economic growth rate, inflation rate, etc… before adopting interest rate policy.
Secondly, the bank should use a range of variable interest rates for varied consumer groups To loyal customers or customers with large amount of deposits in bank, Sacombank – Thu Do Branch should offer incentive interest rate, with special privileges.
3.2.1.3 Investing in modernizing banking technology and improving banking infrastructure
Commercial bank plays a significant role in encouraging the economic development. The use of banking technology has a direct impact on transactions, payments, and accounting Paying more attention to investing in modernizing banking technology and improving banking infrastructure is the best way to create a professional business space in customers’ minds and be more convenient in banking transactions.
As analyzed in different aspects of the company, there are still many drawbacks that constrain the growth of the bank and increase the capital of mobilized capital To go through these limitations, the bank can take a number of steps as follow:
Firstly, they should focus more on applying the new technologies, renovate and add new material and technical facilities to meet all current and future needs It will directly help and operate the bank’s operations in the best way because of all benefits that bring such as establishing a complete and comprehensive internal information system to serve business, ensuring fast, accurate, safe; providing accurate and fast information; etc…
Secondly, the bank need to pay more attention to the development of social media network to bring the highest convenience and flexible to customers It is necessary for the bank to extend its network not only domestically but also globally
3.2.1.4 Enhancing service quality in order to compete the competitors
Increasing the bank's profitability and reputation requires improving the quality of its services Service quality always occupies a decisive role in Sacombank – Thu Do Branch‘s performance, helping exceed growth goals Additionally, improving service quality contributes to increased customer happiness, which is crucial for establishing brand credibility and fostering expansion in the commercial world.
As analyzed in different aspects of the company, Sacombank – Thu Do Branch has many shortcomings, not really making good use of service quality to take care and attract customers To overcome these limitations, the bank can take a number of steps as follow:
Firstly, they have to should use a range of variable interest rates for varied consumer groups To loyal customers or customers with large amount of deposits in bank, Sacombank – Thu Do Branch should offer incentive interest rate, with special privileges.
RECOMMENDATIONS TO THE GOVERNEMNT AND SBV
The macroeconomic environment has a dramatic impact on the capital mobilization of commercial banks It contains many important factors such as economic growth, interest rate, etc The economy directly effect on the improvement of the bank To be more specific, in the context of high inflation as recently, the tightening monetary policy has made the bank difficult in operation, especially in capital mobilization So that, it is important for the Government to have appropriate decisions in order to support the bank operate stably and safely
Firstly, they have to maintain stability and economic growth because it will help to create a leading, contribute to strengthening confidence, positively influence the development of the financial system in general and the operation of commercial banks in particular The bank's activities will also become steady, improve, and develop well if the economy is controlled and kept stable.
On the one hand, controlling inflation is also an important part of helping the bank grow and improving the structure of capital Despite making up a relatively modest portion of the structure, monetization is crucial to earning money Controlling inflation at a reasonable level, ensuring positive real interest rates for depositors is of great significance in creating conditions for commercial banks to mobilize capital from all economic sectors in society.
Owing to the rapid development of society, the legal basis must be built and completed according to international standards, creating a solid legal framework for the operation of the modern banking system There are so many loopholes in Vietnam's legal systems, are barriers to the business operations of commercial banks The Vietnamese legal system's weakness and ambiguous documents have caused unfair competition among commercial banks.
Firstly, the Government need to focus on continuing to review, amend and supplement mechanisms, policies and legal documents in line with the roadmap for the implementation of international commitments in the monetary and banking sector. Besides, creating synchronism and completeness of the monetary-banking legal framework, completing existing bylaw papers, and supplementing existing bylaw documents are all necessary to foster fair competition and follow international practices and standards in banking activities.
3.3.2 Proposals to the State bank of Vietnam
Interest rate is an important tool for commercial banks to mobilize deposits from individuals, economic entities, and credit institutions A reasonable interest rate may create favorable conditions for capital mobilization The right policy is formulated based on the harmony between the interest of customers and the bank Moreover, in the long run, the State bank of Vietnam may abandon the policies based on the aforementioned administrative measures and instead operate interest rates according to the market mechanism, encouraging commercial banks to mobilize and lend on a transparent basis and fair competition, accurately reflecting market supply and demand, avoiding the phenomenon of distorting the yield curve, distorting capital mobilization products
The exchange rate also has a heavy impact on the business activities of commercial banks as well as its capital mobilization Large fluctuations in the currency rate could hurt the bank's ability to mobilize funds Therefore, it would be better for the central bank to adopt monetary policy based on changes in the market If the economy is stable, the value of VND does not move up and down, people feel secure when they deposit their money in bank The State Bank need to enhance the efficiency of foreign currency management because this significantly affects macroeconomicpolicy implementation of the Government Effectively managing foreign currencies will result in stabilizing currency system, attracting foreign capital, improving balance trade, motivating exports, controlling inflation and stimulating economic growth, improving people’s living standard.
Mobilized capital is an important part of the bank’s activities so the State Bank neet to take action to control and support other banks to mobilize Actively and flexibly operating the foreign exchange market and exchange rate to encourage exports,improve the balance of international payments and contribute to the increase of foreign exchange reserves, and take measures to synchronously and effectively to control and manage the foreign currency market, prevent activities of speculation and hoarding of foreign currencies, soon deploy solutions and roadmap to reduce dollarization.
In chapter 3, the these describes the orientation and goals of capital mobilization at banks, particularly the Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) – Thu Do Brach Based on the results of Chapter 2, recommendations have been made to improve capital mobilization at Sacombank – Thu Do Branch The focus on enhancing the bank's brand and reputation, growing the banking network, modernizing technology, enhancing support services, and offering fair interest rate policies are only a few of the numerous universal answers for all problems In addition to the general measurements, specific metrics have been provided for each object The research also offers policy suggestions for the government and state institutions to help boost commercial banks' ability to mobilize capital.
It is essential to both economic growth and corporate operations Economic stagnation and recession may be brought on by capital shortages Therefore, increasing capital mobilization efficiency is a crucial demand for Vietnam commercial banks in general and Sacombank – Thu Do Branch in particular A historic and distinguishing function of commercial banks is capital mobilization, which not only supports other business activity but also provides capital for the entire economy Raising capital has become a difficult challenge in the context of the global economic crisis, not only for Sacombank – Thu Do Branch but also for commercial banks in Vietnam The graduation thesis, " Solutions to enhancing the efficiency of capital mobilization at Sai Gon Thuong Tin Commercial Joint Stock Bank - Thu Do Branch " has primarily concentrated on the following elements, in recognition of the significance of mobilized money
Providing a general literal review and the overview of capital mobilization of commercial bank.
Analyzing the practical situation of fund mobilization at Sacombank – Thu Do Branch and the research also assesses some advantages and disadvantages as well as some reasons for the limits in rasing fund at Sacombank – Thu Do Branch.
Depend on all these limits, there are some solutions and proposals to Sacombank –Thu Do Branch to improve efficiency of fund mobilization at Sacombank – Thu DoBranch.
NHẬN XÉT CỦA ĐƠN VỊ THỰC TẬP
Họ và tên người nhận xét: Chức vụ: Nhận xét quá trình thực tập tốt nghiệp của sinh viên Khóa CQ57; Lớp CQ57/ Đề tài:
1 Về tinh thần thái độ thực tập của sinh viên
2 Về ý thức kỷ luật, tuân thủ quy định của đơn vị thực tập
3 Về kỹ năng giao tiếp, kỹ năng mềm
4 Về kiến thức chuyên môn
Người nhận xét(ký tên, đóng dấu)
Supervisor: MA Tran Huong Giang
Topic: “ Solutions to enhancing the efficiency of capital mobilization at Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) - Thu Do Branch”.